Gulf Keystone Petroleum (GKP), operator of the Shaikan Field in the Kurdistan Region of Iraq, is today providing an operational and corporate update.

This is in advance of the Company’s full year results for the period ended 31 December 2017 which are expected to be announced on Wednesday 11 April 2018. The information contained herein has not been audited and may be subject to further review and amendment.

Operational Update

GKP has continued its strong safety performance in 2017 and into 2018 with no lost-time incidents at the Shaikan field. Operations in the area remain secure.

Plant uptime of 99% in 2017 helped contribute to an average gross production of 35,298 barrels of oil per day (“bopd”), in the middle of our guidance range of 32,000-38,000 bopd for the year.

Since 15 November 2017, the Kurdistan Regional Government’s (“KRG”) Ministry of Natural Resources (“MNR”) has resumed exporting the Shaikan crude via the export pipeline to Turkey. The Company sees the latest export development as confirmation of the suitability of the Shaikan crude within the Kurdish blend.

The Company was encouraged by the signature of the crude oil sales agreement announced on 16 January 2018. The Company is also in dialogue with the MNR on the terms of a potential 2nd PSC Amendment.

Subject to resolution of the commercial matters and the KRG continuing regular payment of monthly invoices, the Company currently intends on investing this year in wells and facilities to expand production capacity to 55,000 bopd.

Part of these investments would include the hook-up of a short (400m) spur pipeline from Production Facility 2 to the Atrush export line, which links to the main export oil line to Turkey. This will reduce trucking requirements, HSE risk and improve netbacks.

Final investment plans for 2018 are under review and will be provided to the market in due course.

Gulf Keystone Petroleum (GKP) has announced that a crude oil sales agreement has been signed between Gulf Keystone Petroleum International Ltd (“GKPI”), on behalf of the Shaikan contractors, and the Kurdistan Regional Government (KRG).

Under the agreement, the KRG will purchase Shaikan crude oil at the monthly average Dated Brent oil price minus a total of c.$22 per barrel for quality discount, as well as domestic and international transportation costs. This discount is based on the same variables contained within other oil sales agreements in the Kurdistan Region of Iraq.

The majority of the Shaikan crude oil is currently being transported by truck from the Shaikan field to Fishkhabour, where it has been injected into the export pipeline to Turkey gradually since 15 November 2017, while the remainder is sold domestically.

The agreement is effective from 1 October 2017 until 31 December 2018. GKPI will now invoice the KRG for oil sales for the months from October 2017 onwards on the basis of the realised netback price and net entitlement volumes in accordance with the Shaikan Production Sharing Contract, as amended by the 1st PSC Amendment in 2010 (“Shaikan PSC”).

The Company continues its discussions with the KRG’s Ministry of Natural Resources (“MNR”) on the terms of a potential 2nd PSC Amendment. The Company will inform the market of any material developments in this regard.

Gulf Keystone Petroleum (GKP) has confirmed that a gross payment of $15.0 million ($12.0 million net to GKP) has been received from the Kurdistan Regional Government (KRG) for Shaikan crude oil export sales in August 2017.

Gulf Keystone Petroleum (GKP) confirmed on Friday morning that its operations in Kurdistan continue safely and securely with the Company achieving average production of 34,525 bopd from Shaikan since the beginning of October 2017.

Shaikan is performing as expected with cumulative production from the field now at 42.4 million barrels, an average of 35,966 bopd in 2017. The Company is on track to meet gross production guidance of 32,000-38,000 bopd for the year.

In line with the Ministry of Natural Resource’s crude export strategy, Shaikan crude production is still being exported via trucks to Turkey. Trucking operations continue uninterrupted with approximately 200 trucks loaded daily.

Following the recent payment for the October 2017 Reinstated Notes coupon of $5 million, the Company’s current cash position is $147.2 million.

Gulf Keystone will keep the market appraised of any changes to its normal operations.

Commenting on today’s announcement, CEO, Jón Ferrier, said:

“We remain committed to ensuring safe and secure operations in Kurdistan, and we continue to monitor the geo-political situation closely. Despite the challenges facing the region, we are maintaining stable operations.”

Shares in Gulf Keystone Petroleum (GKP) were trading down 3 percent this morning following the announcement of its results for the half year ended 30 June 2017.

Reuters quotes analysts at Cenkos Securities as saying that further clarity on payment is required before GKP can commit to proper capital expenditure.

Highlights to 30 June 2017 and post reporting period

Operational

Gulf Keystone’s operations in the Kurdistan Region remained safe and secure throughout H1 2017 with plant uptime at PF-1 and PF-2 of over 99% with no lost-time incidents.

Shaikan achieved average daily production of 36,664 bopd.

Cumulative production from Shaikan has now exceeded 40 million barrels.

In March 2017, Shaikan-8 (“SH-8”) was brought back on-stream.

In April 2017, ERC Equipoise verified remaining gross Shaikan 2P reserves of 615 MMstb, as at 31 December 2016.

With gross production of c.35,350 bopd in Q3 2017 so far, gross production guidance for 2017 remains at 32,000-38,000 bopd.

Operational strategy for investment into Shaikan has been matured throughout 2017.

Financial

Cash flow positive through H1 2017.

The Group has continued to receive regular payments from the Ministry of Natural Resources (“the MNR”) of $15 million gross ($12 million net to GKP) with cash receipts of $84 million net to GKP year to date.

Continued cost control with gross operating costs per barrel of $3/bbl (H1 2016:$4/bbl).

Profit after tax of $0.7 million (H1 2016 (as restated): loss after tax of $232.6 million).

As at 30 June 2017, the Group estimates an unrecognised revenue receivable of $33 million net to GKP with regards to unpaid export sales (December 2016: $25 million) and $76 million net to GKP for the past costs associated with the Shaikan Government Participation Option (December 2016: $71 million).

Cash balance at 30 June 2017 of $118.8 million against $100 million debt principal.

Cash balance at 18 September of $133.8 million.

April 2017, decision taken to pay Reinstated Notes coupon of $5.1 million at 10% interest rate. The decision regarding the October 2017 coupon will be communicated to the market in due course.

Outlook

The Company is progressing in its ongoing discussions with the MNR regarding commercial and contractual conditions, in particular those around regular payments conforming to the Shaikan Production Sharing Contract (“PSC”) and crude marketing arrangements.

GKP is preparing to make further investments to maintain plateau production at the nameplate capacity of 40,000 bopd with a view to increasing to 55,000 bopd, and beyond, subject to MOL and MNR approvals, a regular payment cycle from the MNR and a commercially acceptable investment environment.

“The first half of the year was a period of solid operational delivery, which has seen the Shaikan field continue to perform in line with expectations.

“The Company continues its dialogue with the MNR with the objective of achieving contractual and commercial clarity. Whilst continuing to maintain a rigorous and disciplined approach to its cost base, Gulf Keystone remains cash flow positive and well placed to continue to invest in increasing production from Shaikan.”

Gulf Keystone Petroleum (GKP) has confirmed that a gross payment of $15.0 million ($12.0 million net to GKP) has been received from the Kurdistan Regional Government (KRG) for Shaikan crude oil export sales for April 2017. Company’s current cash position is $140.3 million.

On August 8th, cumulative production from the Shaikan field reached 40 million barrels; another important milestone for the Company.

The Shaikan Field continues to perform in line with expectations with an average daily production of 36,671 barrels of oil per day during the first half of 2017. Gulf Keystone remains on course to achieve its previous gross production guidance of between 32,000 – 38,000 bopd for the full year.

“Safe and reliable operations remains a strategic priority and we continue to be strongly encouraged by the stable performance of the Shaikan Field during 2017. I am also pleased to report that GKP recently achieved two years with no Lost-time-incidents (“LTI”), a testament to the quality of our field operations.”

Gulf Keystone Petroleum (GKP) confirmed today that a gross payment of $15.0 million ($12.0 million net to GKP) has been received from the Kurdistan Regional Government (KRG) for Shaikan crude oil export sales in March 2017.

Gulf Keystone Petroleum (GKP) has announced that the Kurdistan Regional Government (KRG) has made a gross payment of $15.0 million ($12.0 million net to GKP) for Shaikan crude export sales in February 2017.

Gulf Keystone Petroleum (GKP) has confirmed that a gross payment of $15.0 million ($12.0 million net to GKP) has been received from the Kurdistan Regional Government (“KRG”) for Shaikan crude oil export sales in January 2017.

Gulf Keystone Petroleum (GKP) has announced its results for the year ended 31 December 2016, which show reduced losses for the period:

Highlights to 31 December 2016 and post reporting period

Operational:

Gulf Keystone’s operations in the Kurdistan Region remained safe and secure throughout 2016. Plant uptime (at PF-1 and PF-2) of over 98%, once adjusted for export constraints, and strong HSSE performance with no lost-time incidents.

2016 gross production of 12.7 million barrels of oil (“MMstb”), an increase of 14% on 2015, equivalent to an average of 34,794 barrels of oil per day (“bopd”), at the upper-end of our 31,000-35,000 bopd guidance, with no formation water.

Shaikan-8 (“Sh-8”) was brought back on-stream on 11 March 2017 and, while it is still being tested, is producing dry oil at a rate of c.1,800 bopd.

Shaikan production for Q1 2017 averaged 36,293 bopd.

Current daily production is at c.38,000 bopd.

In April 2017, the Company received confirmation from ERC Equipoise (“ERCE”) verifying remaining 2P reserves of 615 MMstb, as at 31 December 2016.

In addition to our 2P reserves there are significant contingent resources of 239 MMstb (2C) as identified in the 2016 Competent Person’s Report (“CPR”) also provided by ERCE, as at 30 June 2016.

Gross production guidance for 2017 is set at 32,000-38,000 bopd; without further investment in the field – beyond maintenance capital – we would expect production levels at the lower-end of our guidance range.

Financial – as at 31 December 2016:

Cash receipts from the MNR amounted to $114.0 million net to GKP (2015: $56.8 million net to GKP).

Revenues up 126% at $194.4 million (FY15: $86.2 million) including $72.6 million in relation to the offset of payables due to the MNR (2015: nil).

Profit/loss from operations before exceptional items of $26.0 million (FY15:$81.7 million).

Loss after tax of $17.4 million (FY15: $214.0 million).

Operating costs per barrel on a gross field basis reduced to $3.5/bbl from $5/bbl in 2015.

As at 31 December 2016, the Group estimates an unrecognised receivable of $25 million (2015: $44 million) net to GKP on a diluted basis with regards to the unpaid export sales and $71 million (2015: $75 million) net to GKP for the past costs associated with the Shaikan Government Participation Option.

Strong liquidity at year end 2016 with unrestricted cash balance of $92.9 million.

Cash balance at 5 April 2017 of $112.7 million against $100 million of debt.

In Q1 2017, the Group received three further payments for 2016 from the MNR of $15 million gross each ($12 million net to GKP).

The Group completed its Balance Sheet Restructuring on 14 October 2016 reducing total debt from over $600 million to $100 million and raised additional cash through a successful $25 million Open Offer.

The Group has decided to pay its upcoming Reinstated Notes coupon of $5 million at 10% interest rate on 18 April 2017.